U.S. consumers' poor understanding of how credit scoring works in obtaining credit cards, mortgages and insurance is costing them as much as $28 billion each year, suggest the results of a recent survey commissioned by the Consumer Federation of America and Washington Mutual Inc. The federation and WaMu have commissioned Opinion Research Corp. to conduct the credit-score survey three times since August 2005, polling 1,000 individuals each time. The latest survey, conducted in June, found that each consumer who does not pay off monthly card debts could save an estimated $105 annually in lower credit card finance charges by raising his or her FICO credit score by 30 points. With FICO scoring, issuers assign consumers credit scores on a scale of 300 to 850. A score below 600 is considered subprime, or a greater lending risk. A low credit score means individuals are spending more money to borrow because lenders charge them higher interest rates to offset their risks. The survey found that less than one-third of Americans (31%) understand that credit scores indicate risk of not repaying a loan instead of factors such as knowledge of, or attitude toward, consumer credit. "Lack of consumer knowledge about credit scores not only increases the costs of their credit and insurance, but also reduces the availability of these and other services," says federation Executive Director Stephen Brobeck. The survey did identify improvement in consumer knowledge about positive credit scores, however, with 28% correctly identifying 700 as the minimum score to qualify for a prime mortgage rate, up from 24% who did so last year. But respondents generally did not understand that credit scores are based on payment histories and how individuals have used credit. Many incorrectly said such factors as income (74%), age (40%), marital status (38%) and education levels (29%) influence credit scores, according to the federation. The importance of FICO scores has increased amid the subprime-mortgage meltdown and the U.S. economy's credit crunch. With less money available to lend, many companies have tightened standards, cutting off loans for consumers with lower credit scores, says Peter DeForest, managing partner at Portfolio Defense Consulting Group, a credit risk management consulting company that builds predictive models.